Taxes on Co-Owned I Bonds

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Topic Author
LongTermGains
Posts: 7
Joined: Mon Mar 25, 2019 10:51 am

Taxes on Co-Owned I Bonds

Post by LongTermGains »

Good Evening,

This is for anyone familiar with TreasuryDirect and I Bond taxes. In my TreasuryDirect account, I am the primary owner of I Bonds with a family member as the secondary owner. The bonds were purchased with funds from a joint checking account, jointly owned with the same family member.

1. Is it possible to opt-out of the tax deferment, and opt-in to receiving an annual tax bill, but with 100% of the taxes going to the co-owner?

2. Do I Bonds generate a standard 1099-INT, or something else?

Thank you
BrokerageZelda
Posts: 463
Joined: Sat Apr 10, 2021 10:39 am

Re: Taxes on Co-Owned I Bonds

Post by BrokerageZelda »

LongTermGains wrote: Fri Jun 18, 2021 10:15 pm Good Evening,

This is for anyone familiar with TreasuryDirect and I Bond taxes. In my TreasuryDirect account, I am the primary owner of I Bonds with a family member as the secondary owner. The bonds were purchased with funds from a joint checking account, jointly owned with the same family member.

1. Is it possible to opt-out of the tax deferment, and opt-in to receiving an annual tax bill, but with 100% of the taxes going to the co-owner?

2. Do I Bonds generate a standard 1099-INT, or something else?

Thank you
I Bond redemption proceeds generate an electronic 1099 form, which must be accessed online in TreasuryDirect on ManageDirect under "Manage My Taxes" after year end.

I am not sure about your other question; it seems to be at the intersection of multiple tax topics described in
https://www.treasurydirect.gov/indiv/he ... rnMore.htm
but does not seem to fit cleanly into any one category. Normally I would suggest looking at filing 'nominee' 1099-INTs with the IRS, but I don't know how that works when a 1099 is normally not issued until the bond is redeemed. I think you should call TD and see what they have to say.
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Taxes on Co-Owned I Bonds

Post by ivgrivchuck »

LongTermGains wrote: Fri Jun 18, 2021 10:15 pm 1. Is it possible to opt-out of the tax deferment, and opt-in to receiving an annual tax bill, but with 100% of the taxes going to the co-owner?
That is not possible. Treasury Direct will to my knowledge only issue 1099-INT at redemption to the primary owner.

I would speculate that the process to achieve your goal would be as follows (I am not sure about this):

1) the secondary owner would report the interest annually without form-1099.

2) At redemption the primary owner after receiving form 1099 would nominate the interest to the secondary owner.

3) The secondary owner would report the interest from form 1099 subtracted by the interest paid in previous years.

As you can see this gets pretty complicated, so you should probably consider carefully if you want to proceed with the plan...
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chemocean
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Joined: Mon Dec 19, 2016 8:45 pm

Re: Taxes on Co-Owned I Bonds

Post by chemocean »

If I recall, interest on all I-bonds owned by a primary owner have to be either 1) accrued or 2) reported on an annual basis. So if you report this one bond, then the interest on all your bonds need to be reported.
Topic Author
LongTermGains
Posts: 7
Joined: Mon Mar 25, 2019 10:51 am

Re: Taxes on Co-Owned I Bonds

Post by LongTermGains »

ivgrivchuck wrote: Sat Jun 19, 2021 12:47 am
LongTermGains wrote: Fri Jun 18, 2021 10:15 pm 1. Is it possible to opt-out of the tax deferment, and opt-in to receiving an annual tax bill, but with 100% of the taxes going to the co-owner?
That is not possible. Treasury Direct will to my knowledge only issue 1099-INT at redemption to the primary owner.

I would speculate that the process to achieve your goal would be as follows (I am not sure about this):

1) the secondary owner would report the interest annually without form-1099.

2) At redemption the primary owner after receiving form 1099 would nominate the interest to the secondary owner.

3) The secondary owner would report the interest from form 1099 subtracted by the interest paid in previous years.

As you can see this gets pretty complicated, so you should probably consider carefully if you want to proceed with the plan...
Does TreasuryDirect generate any type of document that shows the yearly earned interest, something to give to my accountant, or do I need to manually calculate the amount?

Thank you
BrokerageZelda
Posts: 463
Joined: Sat Apr 10, 2021 10:39 am

Re: Taxes on Co-Owned I Bonds

Post by BrokerageZelda »

LongTermGains wrote: Tue Jun 22, 2021 5:17 pm Does TreasuryDirect generate any type of document that shows the yearly earned interest, something to give to my accountant, or do I need to manually calculate the amount?

Thank you
You would need to calculate the yearly earned interest yourself, with the numbers available on the status pages at TreasuryDirect (if you visit the site in the correct month) and/or outside resources such as the helpful charts at http://eyebonds.info/ibonds/index.html.

TreasuryDirect will not generate a formal 'online 1099' until you redeem, and that will only show the total aggregate interest earned since the issue date.
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